Fraternal Benefit Societies or Fraternals are not for profit membership organizations that have a representative form of government and are organized through a lodge system [1] to carry out social, intellectual, educational, charitable, benevolent, moral, fraternal, patriotic or religious purposes. Fraternals provide members with life insurance and other financial protection benefits in accordance with state law and use the earnings to fund member-supported community activities. Fraternals are chartered by state law and have been exempt from income tax under Section 501(c)(8) [2] of the U.S. Tax Code since 1909.

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Fraternal Benefit Societies trace their lineage back through mutual benefit societies, friendly societies and eventually to medieval guilds.[3] Many fraternal benefit societies were founded to serve the needs of immigrants and other under-served groups[4] who shared common bonds of religion, ethnicity, gender, occupation or shared values. The first modern American fraternal benefit society was the Ancient Order of United Workmen, founded by John J. Upchurch in 1868.[5]

“the American fraternal system had its beginning as a result of the fraternal desire of men to cooperate for their mutual welfare and happiness, and that the benefit plan they introduced followed an innate prompting to protect their dependents.”

The Model Fraternal Code which has been adopted in some form by most states defines fraternals as follows:[7]

Section 1. FRATERNAL BENEFIT SOCIETIES. Any incorporated society, order or supreme lodge, without capital stock, including one exempted under the provisions of Section 38(a)(2) of this Article whether incorporated or not, conducted solely for the benefit of its members and their beneficiaries and not for profit, operated on a lodge system with ritualistic form of work, having a representative form of government, and which provides benefits in accordance with this Article, is hereby declared to be a fraternal benefit society.

The court's opinion in National Union v. Marlow[8] is considered to be the leading judicial pronouncement of what constitutes a fraternal society.[9]

National Union v. Marlow 374 F. 775, 778 (1896)

A fraternal-beneficial society would be one whose members have adopted the same, or a very similar calling, avocation, or profession, or who are working in union to accomplish some worthy object, and who for that reason have banded themselves together as an association or society to aid and assist one another, and to promote the common cause. The term "fraternal" can properly be applied to such an association, for the reason that the pursuit of a common object, calling, or profession usually has a tendency to create a brotherly feeling among those who are thus engaged. *** Many of these associations make a practice of assisting their sick and disabled members, and of extending substantial aid to the families of deceased members. Their work is at the same time of a beneficial and fraternal character, because they aim to improve the condition of a class of persons who are engaged in a common pursuit, and to unite them by a stronger bond of sympathy and interest.

As indicated in this case, a fraternal benefit society is required to have a "common bond" among its members.[8] Further, a society is required to specify in its laws the eligibility standards for membership, as well as classes of membership, the process of admission, and the rights and privileges of members.[10]

A fraternal benefit society is operating under a lodge system if it has a supreme governing body and subordinate lodges into which members are elected, initiated or admitted in accordance with its laws.[11] A society has a representative form of government if its supreme governing body is an assembly composed of delegates elected directly by members or intermediate assemblies, or a board similarly elected.[12]

Fraternal benefit societies provide insurance benefits to their members including life insurance and endowments, annuities, disability, hospital, medical and nursing benefits, and such other benefits authorized for life insurers that are not inconsistent with the general fraternal laws.[13]

More than a century after their creation, fraternal benefit societies remain an active part of the U.S. economy. The charitable and volunteer efforts of lodge members significantly impact local communities.[6] There are more than 80 fraternals operating in the United States and Canada today, serving over 9 million members [14] with $380 billion of life insurance in force. In all the nation’s 70 fraternal benefit societies combined, the U.S. government sees a benefit of $3.4 billion in charitable contributions and social capital annually, according to a 2010 Georgetown University study.[14]

In 2011, members of fraternal benefit societies contributed more than 84 million volunteer hours of service and $380 million to their communities, such as charities and people in need.[15]